Myanmar has been thrust into the centre of an economic love triangle. The visit of US Secretary of State, Hillary Clinton, confirms the strategic importance of the former pariah state for the United States, but also for China and India. For would-be investors, the biggest risk may simply be that Myanmar gets too popular, too quickly.
Five decades of virtual isolation haven’t been kind. Myanmar’s citizens live an average 65 years, and a third of them are in poverty. But abundant forests, gas and oil reserves, and a fledgling consumer market of 50 million people provide attractions for investors. So do legacy institutions from British colonial days, which help explain why Myanmar’s GDP grew more than five per cent a year for the past two years, according to the Asian Development Bank. International sanctions are the immediate barrier. But, Myanmar also has to prove that its military junta is history, by making further reforms, releasing political prisoners and easing media restrictions. Letting opposition figurehead Aung San Suu Kyi’s National League for Democracy contest free and fair elections is one thing. Letting its members serve out their terms and contest again will be the real test.
The lack of rule of law will also be a challenge. Foreigners cannot own property or a majority stake in a local business and its currency is pegged at 100 times above the black-market rate. That’s not a deal-breaker, but Myanmar will need transparent investment and commercial laws to offer foreign capitalists adequate protection.
Most worrying is the effect of superpower politics. Myanmar sits between the two most populous nations, India and China, whose economic ascendance is causing visible tension. The United States, meanwhile, has shifted its gaze from the Middle East to Asia, posting 2,500 Marines to Australia. All three have good reasons to get Myanmar on side.
If that means openness and capital come too soon, corruption and inequitable growth could follow. Myanmar needs infrastructure more than it needs exports – it spends only 0.2 per cent of GDP on healthcare; even Angola spends 10 times as much. Myanmar will have to manage its suitors cautiously if its charms are to translate into sustainable returns.